There is no doubt the oil industry, corporate America, the United States and foreign governments and people across the globe will learn many lessons from the tragic events in the Gulf of Mexico. For boards of directors across many industries, these events highlight the critical importance of effective board oversight of risk management.

Most companies face numerous layers of risk in their daily business activities. As we have previously written (see, e.g. “Risk Management and the Board of Directors,” available on the Forum here), the board’s role is not to manage a company’s day to day risk management processes and procedures, but rather to properly oversee the risk management functions of the company by setting the right “tone at the top”. The board should satisfy itself that the company’s risk management processes are designed and implemented consistent with corporate strategy and the associated level of risk tolerance and are functioning properly. The board should also satisfy itself that the company fosters a culture of risk-aware and risk-adjustment decision making.

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